Bloomberg Surveillance TV - October 17 2024

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This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along with Lisa Bromwitz and Amrie Hortern. Join us each day for insight from the best in markets, economics, and geopolitics from our global headquarters in New York City. We are live on Bloomberg Television weekday mornings from six to nine am Eastern. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen, and as always on the Bloomberg Terminal and the Bloomberg Business App. Here's the lacest this morning.

Governor.

It's good to see us, sir, I see you, and welcome back to the program. She's taking some risks, some risks that maybe this campaign wouldn't have taken maybe a month ago. Do you like what you see?

Yeah, take those risks, go right into the lions. Den go right there with Brett Baer, go back and forth. You know, Donald Trump won't even debate again, and she's having a pretty good debate.

I appreciate that.

Is it too late though? Should she have done this interview two weeks a month ago the week.

Been a candidate for ninety days. I think she's moving along. I mean, Donald Trump won't go on ABC without seeing them, So I think she's doing okay.

Do you think she's evolving as a candidate? Then over the course we've seen since July, I.

Think so everything has been so compressed for her and Tim. But now we're in the final stretch.

So this weekend you're hosting a fundraiser for Governor Walls, her running mate. Have you been happy with his performance as her running mate? Supporting Kamala Harris?

Look, I love Tim. He and I were elective at the same time, all the governors, both sides the aisle. He's so genuine and he's so real. We like governors by the way. You know, governors have to balance budgets and live in the real world, unlike these other guy. I think he's a going to be a great vice president.

So you're praising some of his work. He used to be when he was in Congress, a blue dog Democrat, a moderate. As a governor, he's very liberal, legalizing marijuana licenses to undocument immigration immigrants in his state. Do you think that given his record as governor, he was the right choice for a general election when the Democratic Party needed to be seen as coming into the middle, especially after VP Harris's flop flops from her primary.

I don't know.

Legalizing marijuana does that make you liberal? I thought it was sort of libertarian. I think you see that happening in states across the country, you know, fighting for a woman's right to choose, that's about freedom. I don't think that's particularly liberal. Like I said, he balances budgets, so I think he's got a pretty good balance there. He's pragmatic.

Well, there's a question here about how much the Harriswalds campaign is really going to reach out to business and Tim Wats is going to Benish Cantiquett, where he's.

Going to be talked with a lot of business people.

How are they responding to some of their concerns, whether it's about tax increases, whether it's about having a viable immigration policy, or frankly, when it comes to antitrust and the ability to understand whether or not Lina CON's canerman in the FTC.

I like the fact they're reaching out the business, you know, I think the Biden administration was a little more ideological. I think Harris Waltz are much more pragmatic. I've seen that crypto. I've seen that what they want to do with capital gains and not do as much as President Biden. They take the deficit very seriously, as do I. Nobody else seems to. But I think their outreach makes sense, and I'm proud he's coming to Greenwich to tell a story.

Do you have a sense of what they're going to do with any trust?

I don't. That's not sort of an insight I have. My instinct is if they talk about price increases, they worry a little bit about monopoly pricing and pricing power, so probably they'll be strict when it comes.

To anti trust.

One thing that you've talked a lot about with US is this quest around immigration, and you're talking about how there are people coming to Connecticut. That made you really got check some of the assumptions. Do you think that there is anything further that they can do? Tim Walton and Kamala Harris campaign to sort of change the narrative that their immigration policies led to a lot of problems.

I start with the fact that this is a country built on immigration, legal immigration, that's part of our economic strength, unlike other parts of the world, people keeping out.

If they had asked me.

The last night was difference between you and President Biden, I would have said, mister Briden, give me the tools I need to shut down the border to illegal immigration. I think that's what Kama should have said, and I think that's what she believes.

Why do you think she won't say it? I think this is the problem that people have right now. A frame as follows. You say she's pragmatic. You say that both pragmatic. Other people might use a less kind phrase. They might say she's a shape shifter, she just wants to get elected. Untrustworthy. These are the values, the thoughts, the policies of just five years ago, and now some there overhea How can we trust them? What's the message to the electorate without in mind?

What talk about a shape shifter? Talk about no principles. We're talking about Donald Trump there. Look, I think you know where she stands on these issues. Look, she was a vice president, Jonathan, vice president's not worth a war, buncket a spit, and so every saying, boy, you were on board with the Biden administration, that's tot of your job as vice president. Now she's been a candidate for ninety days and I think she's showing her stuff.

But if you think the vice president's job is that important, then how is she qualified for this job? If she's running on some of her time in office as vice president.

I think it's a pretty.

Good training ground, don't you. I mean jd Vance stopped by the US Senate for a cup of coffee. You know, she's been a front and center as a senator. She's been front and center as vice president. I think she's got the training, the experience she needs to be a really good president.

So some states are already voting. I know Connecticut and I you can go out and vote on Monday. I saw that you said you're going to vote on Monday, getting there early.

What does she need to.

Do as really people are already out and about voting. It's not like she has time before November fifth. The time is now, the election has already started.

I'm just urging.

Look, my friends, I'm a little worried, you know, the guys in sort of finance world that I know. Maybe it wasn't so bad under the Trump administration. Maybe I'll sit this one out like drunken Miller. No way, this is a transcendental of vote we've got coming up here right now. I came in the office under President Trump. The government was shut down. Remember every time you didn't get your own way, you shut down the government.

You know.

Then we had COVID and he said, we don't have a stockpal you don't have any stock. Oh, we had to go to China to buy our masks. It was dysfunctional there for two and a half years.

This election is that important.

I can't stand people saying, maybe i'll set this one out.

Let's get into some of the issues. You could have very low unemployment right in a study of Connecticut, it's something around three and a half pounder finance because people have been leaving the state.

We all want legal immigration.

In fact, the former president of SOLF, Donald Trump, in a convers saction with essentially talked about that that he wants legal immigration. How are we going to achieve that as a country? It's something that I think a lot of us can agree on. That's what we want. I went through a very long process to be here. I know how difficult it is. How do we make it easy for people to come here legally to fill the job openings that you have in a state like Connecticut.

Well, first of all, challenge your bretech. So we have a lower unemployment rate than the rest of the countries, not because people are leaving the state. In fact, for the first time in the generation, people are moving in the state. Some of them are coming from New York, and I'm.

Really proud of that fact.

How do you keep that economic momentum going? You know, for us manufacturing on shoring manufacturing, we have a lot in the defense trade.

They're growing.

It's a bigger piece of our economy. Fintech and life sciences sort of the next generation. We had a lot of old industries Jonathan, right, that was sort of our reputation no longer.

Yeah, But you're talking about what policy is going forward? Can there be to be implemented that actually can be viable immigration policies?

I guess the bigger takeaway is you.

Said that a lot of your business friends and colleagues are on the fence, like Duck and Miller, don't want to vote necessarily feel like it's an equal chance between the two. What do you think is driving them to feel that way? What do you think is the most misunderstood policy that you kind of want to underscore and want them to understand.

I think.

For a lot of those folks, cut my taxes is kind of determinant of there, despite what it means to the deficits, despite what it means to make in investments. Look, you know what I like about commloss. She's not talking about handing out money to people. She's talking about opportunities. She's saying with daycare, I'm going to give you the opportunity to start your own business. It's an ownership economy. I think it's a different field than we had for the last four years.

Governor, you're always generous with your time.

It's going to see you against I did against sing Thank Scutty, join us nap for what thank good morning to you, good morning, John, good to you. Netflix reporting after the closed a little bit likes we won't do single names for you, but the emphasis starts to shift away from the financials and towards some of the media tech type players. How high is the bar for the rest of the market after what we've seen from the financials early in the last week.

Well, we've gotten off to a great starter, as you know in the last week with banks and even seeing some of the consumer plays as well. So the bar is hi, Jonathan, And one thing we've been talking about is respecting that rotation since July and August. It has been fairly consistent since then that you've been seeing the value in cyclical sectors responding better to their earnings results.

The tech story has been a mess. I think this week's a fantastic example of that. ASML drops, everyone's foot TSMC comes out, Everything's okay. Where is that trade now?

It is a mixed bag.

At the moment, it was the only game in town for eighteen months. So you're seeing the broadening out of earnings into other sectors. We talked about financials. Industrials is certainly another place.

Materials.

Let's see what happens with China, which I know we'll get into, but we're seeing better global growth potentially. So the reality is it is a higher bar. It's a mixed bag. The Magnificent seven itself has gone almost to like the dynamic duo or the dynamic two, So things have certainly changed.

Yeah, well, you talk about the idea of growth outside of the US, and you talk about China, and yet you've been telling people not to buy into the Chinese equity rally, and frankly it's probably face on today's action, which is one day it seems to be where the mood is shifting. How much can the rotation continue if all of the pillars don't hold up. You have the earnings, you have FED rate cuts that people believe will be

It's a really really good question, Lisa, and in particular, we think as it pertains to the US leadership in large cap value fed cuts, more confirmation about a soft landing. We've seen that in services, but do we need to see more in manufacturing. Yes, manufacturing has lagged, so that's still to come.

And then it's the earnings broadening out.

So we think if you have enough domestic drivers that can still power the US trade, you're not necessarily as reliant on China. Continue to follow through with stimulus to get that.

Trade to work.

How excited can you be outside of the US, And I'm talking about Europe in particular. If you don't have China cooperating, you.

Got to pick your spots.

I mean, look at some of these countries like Germany as an example, that's been entirely reliant on autos for a long period of time.

So not only are.

There cyclical pressures there, there are structural pressures there with changes in the industry, with competition, new technologies, and so I think there's a lot of more bottom up idiosyncratic risk to those places. Then maybe most people discount Dan.

Let's talk about the geopolitical and domestic politics. These risks you say are over the market. When you talk about the US election, you say the passing the election will be a clearing event with downsign volatility. What about if there's a contest.

Election, So notably, Anne Marie, we didn't say election night, So we do subscribe to the fact that it will be more of an election week. So once we get past that week, we do think that it'll be a risk clearing event.

We will accept a winner. And what's notable, and we've talked about it.

Over the last several months, the market continues to climb this wall of worry. We think the election's one component of that. Two years ago, it was trying to disprove the recession. A year ago, it was what was the path of the Fed? Would they be proactive or reactive with rate cuts? We think the election is the last run on that wall of worry.

But what if there's a Florida recount issue, what if it's that kind of contested election, It.

Could certainly be a higher volatility environment, But we do think that it's going to be short lived.

You can't wait to see the back of this.

Can you cannot wait? I can find it, cannot wait. I think we're all in agreement on that.

Possibility wishful thinking. Do you think this is that typical election that once the event is cleared, we're back to business or could we see some serious changes to policy that we all need to Passentien see.

Well, it's an excellent point, and not to diminish this is the gravity of the moment. I think the one scenario that does present the most near term volatility is that red sweep scenario, which is over the last week or so been increasing in terms of the betting odds.

Why is that more relevant?

It's relevant because in Trump two point zero with a red Congress, debt to GDP is thirty percent higher than it was in sixteen. Interest rates are way higher than they were back then as well.

It's a different backdrop.

And so the idea of doing all this fiscal expansion, tariffs, trade, extreme trade policy, and potential changes to immigration policy, all of that throws a real wrinkle in this Goldilock soft landing disinflation thesis.

Den sketty, appreciate your time, Thaank. You could see some big changes then, sketymoke and standing investment management. Let's get across the Jeremy stretch of CIPC. Jeremy, your innerial take on this, and then I want to get it into ultimately what is holding them back from pre committee to even more given how dreadful the bank drop is for European.

Growth, Well, clearly the data backdrop has materially deteriorated.

Since that September meeting.

I think you've touched on the PMIS. I think the inflation downturn was obviously more aggressive than expected, Although if you were listened to the September press briefing, Madam Reguard tried to pre prepare the market for a downturn in September due to base effects. But I think it is still this sort of broader negative backdrop in terms of the global manufacturing sector, which really is amplifying the Eurozone downturn,

There's a big wrinkle in that approach, though, Chemine.

You know it.

When Traaghi led the ECB, he had to convince the Germans to do things they did not want to do. This time around, though, the German economy is the weak link. And if I'm looking at the Euro this morning, here's my question to you in foreign exchange. Should the Euro be training on rate differentials or growth differentials banked up by an ECP that's willing to support growth in a material way.

Well, I think at the moment we're looking at rate differentials.

I think we've seen a clear crossover in terms of what's been priced for immediate policy action from the FED relative to the ECB over the course of the last month. That's really been constituent with this retreat in terms of Euro dollar over the course of the last two to

So I think it is the case.

That headwinds for are obvious.

The risk of.

Further activity from nec BE is evidential, But I think it may be the case that as we get near that sort of one oh eighth threshold, that might be an opportunity to expect some degree of slow down in terms of this retreat from those recent heavy highs of one twelve.

Jeremy, how much does the ECB essentially have their hands tied as a result of the pace of the Fed. How much do they want to keep the euro in this sort of zone in order to prevent important inflation from really coming into play.

Well, absolutely, the evaluation of the euro obviously has an impact via the import price dynamic.

So in a sense you.

Have nominal commodity prices which will always be evidential for the inflation backdrop, but the euro does amplify that if we were to see a substantial cheaping of the euro, So in a sense there is a recognition as to what the Fed is doing is relevant for the ECB. But I think the majority of the ECB members will try and look at the policy narrative in isolation. Look

But if the Euro were.

To cheap them back to one four one oh five, that's not our base case. But if that word happen, then obviously that would create greater inflationary pressures and that would prove to be problematic for the ECD policy narrative.

Jeremy, appreciate the updates sir, and your reaction to an ACP rate reduction this morning. Genreally stretch there of CIBC. This is the Bloomberg Seventans podcast, bringing you the best in markets, economics, a geopolitics. You can watch the show live on Bloomberg TV weekday mornings from six am to nine am Eastern. Subscribe to the podcast on Apple, Spotify or anywhere else you listen, and as always on the Bloomberg Terminal and the Bloomberg Business app.